Saturday, March 22, 2008

The Current Financial Crisis: What is It?

Still pretty cold up here in Massachusetts. Maybe another 3-4 weeks until a sustained warm up takes hold. I really need to go fishing. I was halted on the road from the house this morning by a group of wild Turkey's (7 of them) that decided to take a slow stroll down the middle of the street. Pretty wild! Kevin, are the Turkey's going to eat my potatoes?

Book Recommendation
I have a few books that are collections of the best Sci-Fi short stories of the last century. When I am short on reading material, I read a few of them. I read a great one the other night by Harry Turtledove called "The Road Not Taken". There are copies of it online, and it is very short and I loved it. I was looking over some other works from the author, and I went to Barnes and Noble to get them and I saw William Fleckenstein's new book "Greenspan's Bubbles" on the shelf. I got it today and read it earlier. It is pretty short page wise, but VERY illuminating indeed. I STRONGLY recommend getting the book. I will not go into it too much right now, but safe to say that Sir Alan was indeed lost when it came to monetary policy. No reason to think the new FED head is any different.

The Current Financial Crisis: What is It?
After review of the morning money shows and a trip around the financial net this evening I was struck by the now accepted idea that the FED and the US government now will have to start buying up mortgage backed securities and other big losers in order to stave off a "Financial Crisis". It is truly amazing to go from "we need lower rates" a few months ago to "Nationalize all bank loses to avoid a Depression".

While I would dearly LOVE to spend about 10 hours on the debate of whether to nationalize things or not, the point is now lost. There is no longer any need to argue and fight against such a foolish and retarded way to go, it has already begun and cannot be stopped. Nationalization is on the way and there wasn't even a debate or a vote. Oh well.

Instead what I want to find out is what this major "Crisis" is in reality. I see the words Depression, Hyperinflation, Japan rerun (deflation), and others floated out without any supporting evidence of any of them. As we move forward with the government (you and me and the future children) assuming the ownership of private bank assets, can we at least ask and get an answer to what it is we are trying to avoid? I think it only fair.

How dangerous and scary are things? Bad enough that Wall Street could only muster $130 BILLION dollars in bonuses for their employees at the 2007 end of year payout. I mean, that's just terrible! Imagine things being bad enough that the Bear Stearns employees, working for an insolvent company, only collected 3 BILLION in bonuses before locking the doors. Truly deplorable!

I hate fear mongering on any level. The threat being used right now is that we must do these things or else. What is the "ELSE"? Nobody has stepped forward to flesh that out. Does anyone even know? I call on big names like Roubini, Delong, Calculated Risk,Denninger, and Krugman to explain in some general terms what they are talking about.

Japan had a "Lost Decade". But I do not think the populace burnt Tokyo for fire wood or resorted to cannibalism to survive the winter. Last time I checked, Japan seemed to be ok. If the current "Crisis" goes on, will Americans have to spend some time getting by on much less, or are we going to have to live in caves and eat our pets to survive? Who knows? The point is before the reins of finance are passed on to the government (Katrina response was soooo good right?) and we accept basic communism as a national goal, somebody needs to persuade me that we are indeed trying to avoid some terrible fate and not just trying to avoid poor bank earnings for a year or two. The time is up for using a term like "Crisis" without any meaningful idea what in fact is the crisis. Here is a challenge: explain in some basic detail what is in fact the crisis being averted at any cost without using terms with no meaning like "banking failure", "systemic meltdown", "depression" and the like. Are things indeed so bad? Not so bad? Acceptable or not?

Have a good night.

13 comments:

Anonymous said...

Wow! Excellent post and insightful point being made. There is a lot of hyperbole and fear-mongering on the one hand, and then back-pedaling on the other. Not sure if I'm mixing metaphors there, but we are headed toward Something Big and I don't think us ordinary folks even know what or why.

For sure it's a huge govt power grab. That's at minimum. Who profits as all this shakes down will eventually be revealing. But by then it'll be too late to have any vote or say.

The fact that the US and Canada have made deals to send in each other's army to keep order in cities sounds like we may be far behind the curve here by just watching the banking meltdown. I hate to sound like a tin foil hatter, but until the basic questions in your post are answered, we really don't know where this is going. All we know is that we're along for the ride.

getyourselfconnected said...

Anon,
Can you expand on the army deployment to cities thing? I have never heard of that before. Yes, I think we need answers to some basic questions before we overhaul the system and give it to the government.

watchtower said...

This is just my opinion, which coupled with $5 will get you coffee at Starbucks:

We (Americans) are going to continue to slide further down the "standard of living" slope.

I don't see it going to the "caves and culinary pets" scenario. I see it more as a declining British empire type of thing, with the NAU being a possible necessity to compete (no, I'm not for this, but it looks more and more the way things are headed). At some time in the future (hopefully the far, far, future, I have an 8 yr old daughter) I would expect to see Russia (and possibly China)come into the picture (not in a pleasant way). I do not believe that we "won" the cold war.

After that, then I would entertain thoughts of canine cuisine.

OK, now that I've said that, get ready for a continuation of Pax Americana, to infinity, and beyond!(hat tip to "Buzz Lightyear")

Anonymous said...

GYSC

"Kevin, are the Turkey's going to eat my potatoes?"

No we have them all over out here and as far as I know there are no problems, now Voles are another mater altogether.

As far as the so called crisis, I don't think we are there yet but our leaders will probably make sure we are over the next couple of years.

Trade deficit
Budget deficit
Peak oil
Unfunded government liabilities
Baby boomer retirements
Falling dollar
Rising inflation in the price of needs not wants
Huge forgein holding of US treasury debt
Low national savings
Society that is based on ever rising asset prices
Event outside the US
War

Take your pick, In my view I think what will be the crisis hasn't hit yet and it will come out of the blue this will be when the printing presses are tuned on, the dollar falls like a rock leading to the loss as the world reserve currency status and Greenspans last bubble US treasuries a dumped in mass. One way or another it will be government reaction that causes it but even then we won't be living in caves I don't think.

Kevin

watchtower said...

One more cool car in a cool movie:

"I Am Legend" 06 or 07 Shelby GT500, Will Smith's "pony"car is used to rustle up some grub.

Anonymous said...

This is no longer a free market. Free markets don't have government intervention. Oh wait well this one does and it happens all the time didn't ya know?

G

PS: This is bullkrap and everyone knows it. In my opinion the spring in our system is under some serious pressure right now.

Anonymous said...

GYSC

Being you were on cars and touched on growing potatoes while we were discussing the end of the world here is a link to growing them in used tires sounds interesting.

http://www.humeseeds.com/potato.htm

LOL
Kevin

I was adding it up and I think over my lifetime if I have might have spent 30k on vehicles and my last one a used 2002 Silvarado 1500 with 24k miles on it was over half of that. Tight as bark on a tree I tell you.

Anonymous said...

Getyourselfconnected --

I saw the Canadian Army/US Army collaboration story a few weeks back on George Ure's blog 'Urban Survival,' which can be a bit fringe at times imo, but I remember clicking the link and the story seemed legit. I'll try to find it and post it here.

Anonymous said...

Getyourselfconnected --

I saw the Canadian Army/US Army collaboration story a few weeks back on George Ure's blog 'Urban Survival,' which can be a bit fringe at times imo, but I remember clicking the link and the story seemed legit. I'll try to find it and post it here.

Anonymous said...

Getyourselfconnected --

I saw the Canadian Army/US Army collaboration story a few weeks back on George Ure's blog 'Urban Survival,' which can be a bit fringe at times imo, but I remember clicking the link and the story seemed legit. I'll try to find it and post it here.

Anonymous said...

oops sorry about clicking the button 3 times!

Anonymous said...

OK, this isn't the original article I read, but it seems to be a story about the same topic.

http://www.northcom.mil/News/2008/021408.html

watchtower said...

While I don't believe the current financial situation to be a crisis leading to living in caves (I'm just using "caves" as a metaphor), here are some things that I do which could label me as a "nutter".

I try to keep at least 3/4 tank of gas in my vehicles at all times.

I have some gasoline (Stabil added) put back here at the house that I rotate between my 4 wheeler and riding mower. (have you ever seen pictures of gas lines in the 70's, plus people went nuts after Katrina here, and were filling gas cans and vehicles like crazy)

I have a generator (I also live in an earthquake zone).

I have a little extra food and water put back.

I am going to try to make a garden this year, plus I've been thinking of putting some fruit trees out.

I'm going to buy a wood stove for my garage, that way if worse came to worse, I could move it up to the house (my brother owns acreage that has trees, if you don't have access to wood, this might not be a viable option).

I try to help my neighbors any way that I can (it makes me feel good, plus they keep an eye on my place for me when my family and I are on vacation, etc.)

I'm teaching my daughter how to fish, line the sights up on a pellet gun, ride the 4 wheeler, and when she gets older I'll show her basic vehicle maintenance, home repair, etc., try to give her a balanced education (oh yes, she will learn about money, one thing I tell her...if you can't pay cash for it, then you can't afford it)